Basic commercial lease guidelines

Important guidelines to be considered by the owner and the tenant during a corporate lease

Every owner and a tenant who is involved in the leasing of a property in India for corporate purpose should know the precise guidelines and the rules implied to it. If both are not aware about the rules and regulations of a commercial leasing, both the lessor and the lessee will surface problems.

What is a lease?

A lease is nothing but a contractual arrangement stating that the lessee (user) pays the lessor (owner) to use his asset. A lease is given on tangible properties like the use of a computer program, use of radio frequency and so on. This is known as the rental agreement. On the other hand, a gross lease is a process where the tenant pays a flat rent amount with the landlord paying all the property charges regularly which is incurred by the ownership of different materials.

The difference between a commercial lease and a residential lease agreement:

A commercial lease is different from the residential lease based on various purposes. The commercial lease is seeked by a tenant for renting a space for various business purposes. On the other hand, a residential lease is again taken by a tenant to rent a home or a space to live in. On the contrary, the parties in a commercial lease agreement will have a greater negotiating and bargaining power when compared to the parties in a residential lease agreement.

The theory of the commercial leasing agreement:

A commercial leasing agreement is a process wherein the real property is leased out for commercial purposes. This includes the lease of a store, an office, an industry and other commercial buildings.
The commercial lease agreement does not have a standard or required form unlike other contracts. The party can use any form as long as the basic element of the lease agreement is present.

The basic elements to be considered for a commercial lease agreement are:

• Start and termination dates.
• Property address.
• Rental amount and complete details of all deposits.
• Names of all the parties involved including their signatures.
• The interval of payment.
• The provision of lease renewal.
• The names of the landlord and tenants and other parties involved and their signatures.

Things that an owner should know before leasing out his asset:

• An owner should understand the lease process from beginning to the end. This will help him flourish a good business.
• The owner should understand the key commercial real estate terms.
• The owner should analyse a tenant’s needs and determine the square footage requirement.
• Negotiations, including lease clause analysis and other issues of significance should be carried out clearly.
• The owner should assess the tenant’s lease vs. purchase decision (cost of occupancy analysis) in detail.
• The owner should provide a method of property comparison analysis based on a market survey to their clients.
• The owner should develop the critical Request For Proposal (RFP) before leasing his asset.

The period of a leasing agreement:

There are no particular counted months for leasing out a property. The agreement can exist for any length of time and can last for more than three years. The owner is the one who can decide the number of years before leasing out his property.